Mumbai | Bengaluru:The Tata Group has finalised a $200-250 million primary cash infusion in BigBasket as part of its larger deal to acquire a majority stake in India’s biggest online grocery company, said people with knowledge of the matter. The group is also said to be closing in on a majority stake in online pharmacy 1mg.
Tata will shell out a total $1.2 billion, in a mix of a primary and secondary sale of shares, giving it a 60% stake in BigBasket, said the people cited above. The salt-to-software conglomerate is likely to provide a full exit to two of BigBasket’s biggest investors, Chinese e-commerce giant Alibaba and scandal-hit private equity firm Abraaj Group, one of the persons said on condition of anonymity.
ET first reported about Tata buying a majority stake in BigBasket on 28 October 2020.
Emailed questionnaires sent to spokespersons at Tata Group, BigBasket and 1Mg did not elicit a response till press time on Tuesday.
IPO Plans by 2022-23
The transaction, which is expected to close over the next few days, will emerge as one of the largest mergers and acquisitions (M&A) deals in India’s burgeoning consumer internet space and will ascribe a valuation of $1.6 billion to the Bengaluru-based company. BigBasket’s last-round valuation was $1.2 billion.
While Alibaba holds a 27.58% stake in the company, Abraaj Group owns about 18.05%, according to data from business intelligence platform Paper.vc. Acquiring the stakes of just these two investors will give Tata close to the majority stake it’s seeking in BigBasket.
The transaction may provide partial exits to smaller investors.
The terms of the deal include a plan to take BigBasket public by 2022-23, giving investors who remain an upside in the near future. The Tata Group will also hold the right of first refusal on any such stake sale by other investors. BigBasket CEO Hari Menon recently said that an IPO would help investors exit, but didn’t elaborate.
In September last year, BigBasket said that the number of new customers on its platform had increased by 84% from pre-pandemic levels and that retention rates had risen to 50% from 30-45% earlier. The company also said it was processing more than 20 million orders per month and had hit a run-rate of $1 billion in annual revenue.
BigBasket’s founders include Vipul Parekh, Hari Menon, Abhinay Choudhari, Ramesh VS and VS Sudhakar. They own a little over 5% of the egrocer.
Tata is also in the last lap of executing a secondary transaction of $200-250 million to acquire a 55% stake in online pharmacy 1mg, according to sources. ET had first reported the potential deal on 6 November last year, which followed Reliance Industries Ltd.’s foray into the space, acquiring a 60% stake in Netmeds for around Rs 620 crore.
The e-pharmacy segment, like the online grocery space, surged due to the Covid-19 pandemic, as consumers sought the safety of buying online rather than stepping into offline stores. Analysts and company insiders estimate that the online pharmacy segment doubled sales in the first three months of the lockdown.
That’s provided the industry with a strong growth thrust, hastening consolidation. Apart from the moves by Tata and Reliance, Mumbai-based Pharmeasy is in the process of acquiring smaller rival Medlife. Amazon is looking to acquire a minority stake in India’s largest retail drugstore chain, Apollo Pharmacy, ET reported earlier.
The investments in BigBasket and 1mg will give wings to Tata’s upcoming digital service along the lines of a super app, which will give consumers a single point of access to myriad services, including online shopping for groceries, medicines, electronics, fashion and more.
The push is part of a renewed look at omnichannel retailing at the Tata Group, which tried a similar exercise with its Star Bazaar stores, scaling up its StarQuik service when the pandemic hit India at the end of March. However, the service failed to gain traction, said people aware of the matter, losing out to BigBasket, Grofers and marketplaces Amazon and Flipkart.